Well, I don’t really like them. Sure, EVERYBODY would rather go ahead and close in the usual 30-45 days, but there is a good side to this type of contract. Guess what it is? The buyer will typically pay you more with a contingency to sell their house first than they would if they could close without having to first sell.
I don’t really get it, but I see it all the time. A buyer with a house to sell gets really nervous about not knowing where they will be living once they sell their place. What they do is go out and find a place they like, and kind of “Reserve” their spot in line. Now, unless the buyer already has a contract on the house they are selling, I always counterback with a kickout clause. That basically means the IF the seller would like to sell the house to another buyer without a contingency, they give the contingency buyer a certain amount of time to remove the contingency or back out of the deal.
Another thing I like is that IF the contingency buyer can and does remove their contingency, you have a back up buyer. Sometimes it helps you when negotiating repairs after the inspection if the buyer knows there is somebody else wanting the house if the deal falls apart!
I don’t really care for this kind of contract though when I am working with the buyer…..for all those reasons. When I have a buyer who wants to write a contingency offer, I usually try to get them to just wait until we sell their house first…..unless of course we are just using it to buy time and they are able to remove the contingency if another buyer comes along for the same property. Here is why I don’t think they are a good idea for the buyer who can’t possibly remove the contingency if needed: Any decent realtor is going to counterback with a kickout clause. So, that means that if another buyer comes along they will lose the house. If no such buyer comes along, that means that the house would still be there when their house eventually sells, and they could probably strike a better deal at that point.